Businesses of all sizes need to interact with other businesses and people all the time and it is a constant challenge for them to properly assess the wherewithal and bona fides of those with whom they need to deal with. This can be particularly important when the parties first need to interact, as it can make the difference between a successful interaction, a missed opportunity or a failure to even get past the first base.
This problem is known and dealt with in the best way the parties can which varies in complexity and cost depending largely on the size of the business and the type of interaction and where it is likely to head. Adding a further layer of complexity is the growing need to perform due diligence in all dealings particularly in large publicly listed companies which more than other forms of business require that there be systems and procedures for legal and good business practice.
By way of example only a small business relies on the experience of the owner/manager who has contacts they can rely on for independent advice, they have their own ways of making assessments of character and have formed views on the reputation of various parties. They can make enquiries with third parties such as credit providers, business advisors in the particular trade and credit rating agencies. However, in such circumstances generally their experience tells them when the investigation has gone far enough and what parties they can interact with to each other's mutual benefit.
By way of example only large businesses have separate departments to deal with new contacts or protocols for each department to follow when a new interaction or even a party that has recent interactions with the same or other departments of the same company makes contact to do business with the company.
The main aim of a large business is to ensure that any new party that wishes to interact with them meets a range of criteria that will vary depending on the type of interaction required. For example if the new party is a job applicant there will be a collection of information that needs to be verified, such as last employer, educational qualifications, etc. If the new party is to be a supplier of goods, then there will also be a collection of information which again needs to be verified and may include the testing of goods and a history check to determine the reliability of the supplier to other companies, etc.
It will be apparent that for every type of interaction and possible future expansion of the types of interaction the verification step is common. However, it is also apparent that the verification step is infinitely varied and requires multiple skills and contacts that cannot always be performed by just one individual even when they are following documented protocols.
The time and even the uncertainty of the reliability of the information provided can make the overall process of limited value to the business let alone satisfy legal requirements upon that the two parties may need to rely on in the future.